THE CHRONICLES OF A CAPITALIST LAWYER

RANDOM THOUGHTS OF A CAPITALIST LAWYER ON LAW, ECONOMICS, AND EVERYTHING ELSE

  • An Introduction to Voting Paradox or Why Do You Even Thinking About Voting?


    Imagine that you are a voter in a general election for the newest legislative members. Suppose that you dedicate your own time to know each particular candidates in order to vote as an informed voter. You further realize that individually, your voting will be pretty much insignificant, you can't and will never know whether your voting will be a decisive one in case there are a lot of voters (let us just say that in the context of Indonesia, there are around 60 million voters). Calculating all the costs for doing your personal research and doing the act of vote itself plus your understanding of how insignificant your vote is, would you still call yourself as a rational being if in the end, you still vote? (To shed some light, the typical definition of rationality used in this discussion is the definition used by economist, rational person means a person who act for his own best interest)

    This is the basic premise of the Voting Paradox's concept, at least the first part of it (I'll deal with the second part later). It genuinely asks why rational people vote even though the circumstances show that it's an useless act and costly. Is this a solid evidence that people are irrational? Or is there something else that we miss? From what I have read, there are a lot of explanations for this behavior, but no solid answers. Nevertheless, for the sake of discussion, I guess it would not be a problem if I share some of these theories to my readers. Maybe one of you can provide a better explanation.

    Voting as a Way to Express Your Voice
     
    The first theory argues that people vote because it is a way to express their voice. It might not be effective, but hey, people have not found a better way anyway, so why don't with stick with voting? Under this theory the act of voting is considered as a type of consumption. The satisfaction of voting comes from the act of voting itself, i.e. shouting your opinion and hoping that somehow your voice matters. At first, I consider this as a ridiculous theory, but then I realize, I'm doing the same with my blog :p

    What can we conclude from this theory? Since the rationality is derived from the satisfaction of doing the act of voting, such satisfaction comes with certain expectation, there is an inherent cost and benefit analysis here. If you know the probability of your vote being significant is small, and thus the benefits of voting are uncertain, you would be less likely to vote if the costs of doing so are increased. A simple conclusion but apparently this is supported by some empirical findings. Some good examples, people are less likely to vote in a rainy day or if the voting location is too far from their home or if the registration process is too complicated.

    Voting as a Strategic Act

    The second theory argues that people vote when they think it is a strategic one. I would guess that the applicability of this theory is limited. First, there are not many occasions where voting can be a strategic one, such as in a election where the results will be close. Second, while this might work in smaller groups, it is difficult to asses when your voting will be a strategic one in terms of big elections.

    Voting Due To Group Mobilization

    The third theory's basic argument is simple, people vote due to group "pressures". I can agree with this. Sometimes, group pressures is the best way to encourage people to vote, whatever the platform of the group is. And I have a very good example of this behavior. In my university days, I saw how the University's Islamic student organization encouraged their members to vote for their candidates for student senates and they were quite persuasive in doing this (although persuasive might be an understatement). And these guys have won the election for many times. How can they win the election even though they are not the majority? Well it seems, being "rational people," the other students chose not to participate in the voting process, thus, giving a major benefit to the groups who vote militantly. This end result actually has a strong connection with our last theory.

    Voting as A Game of Cat and Mouse

    Suppose that we know that most people are rational and there is a huge probability that they will not vote since it's an useless act. In this kind of situation, what will you think? If you vote now, you voice will absolutely matter! You will be the determinant of the voting result. But then again, when all the people think the same, we'll back to square one, i.e. people are returning to the voting chambers, meaning your voice becomes worthless again. See how this resembles a game of cat and mouse?

    It should be noted, however, that while this game can be cyclical in theory, in practice it can actually alter the end results. My case of the Islamic student organization is a good example. Other students didn't vote, they were skeptical with the election. Now, as a rational person, what would you do in the place of the Islamic student organization? Of course the answer is: gathering all the like minded people to vote for your interest and beat the majority that have chosen not to vote.

    Conclusion

    So, in the end, can we say that voting is an irrational act? Is there any Voting Paradox? I still don't have an exact answer. But my gut feeling says that voting is a rational act. My reason is simple, as long as the costs of doing so is not that significant, you should always vote and even better, encourage other people to vote too. And when calculating the cost of voting, you must also calculate the costs of not voting, such as getting people that you hate to lead you, or even worse, getting incompetent people that will ruin your life  as your leader and you don't have any mechanism to put them down other than a bloody revolution (yeah, I'm talking about our honorable members of legislative board). I guess this is something that missing from the equation. There are costs and benefits of voting, but on the other side, there are also costs and benefits of not voting. To be an informed voter, we need to calculate both, or else, you'll end up thinking that you a are rational person, though in reality, you're just an ignorant fool.

    Note: Most of my materials are derived from Stearns & Zywicki's Public Choice - Concepts and Applications in Law. A highly recommended book for the student of Public Choice Theory and anyone interested with Public Policy.
  • Learning Style in US Law Schools - A Quick Thought


    I can still clearly remember how I learn the law during my days at the University of Indonesia. I seldom took any notes, usually I preferred to copy my friends' notes which were available for a cheap price at our beloved copy center, Barel. Most of the time, I sat at the back of the class since I'd already known that I can found most, if not all, of what the lecturers said in the learning materials provided by them in the copy center. And lastly, I usually learned for my exams during the trip from my home to the faculty (which took around 2 hours). As I said in my previous post, life is pretty simple and easy in the faculty of law. I even once declared my faculty as the most relaxed faculty in the South East Asia (that's during my trip for an international student meeting in Korea in 2004 and it is based on comparison with what other students doing in South East Asia, Japan, China and Korea).

    I must say though that the above system is not entirely bad. Since the students were not that busy, I had plenty of time to do other activities, including joining student organizations, doing personal research (this is how I can have the time to learn Islamic legal theories), reading other legal materials that were interesting to me, taking as many classes as I want (I once took 8 classes in a semester without any difficulties), and of course, dating my girlfriend who later on became my wife :p. 

    But I guess I can no longer maintain that learning style in the University of Chicago. Last Thursday, I took a simulation test for a criminal law course concerning criminal attempt (percobaan tindak pidana). Although my quick answers are correct, I can't finished the exam in time! The problem? I used too much time to read the cases which serve as the background for the exam's answers. The cases have been provided two weeks ago to the LLM students, but I only have the chance to read it once and I already forgot everything by the day I arrived at Chicago (just coming out straight from a 19 hours flight). Facing this dreaded fact, I quickly realized that having the ability to correctly analyze legal issues is one thing, but you can't trick the pages that you need to read in order to complete your analysis and make it as a correct one. 

    So while reading the materials for my corporate law course, I start to understand little by little how the US law schools shape their legal education. This Cases and Materials book is designed so that the reader can't get a full understanding of the legal issues without reading the cases and materials completely. There are no simple summarized issues that can be easily grasped and memorized like in Indonesian law text books. You have to walk through a maze of judges opinions and excerpts of law review articles, and analyze the arguments within before you can reach any conclusion on what you have learned from those materials.  Like it or not, you are being forced to read and think it through. But by the end of the day, the concept will stay with you forever.

    While I consider this as a good method for studying the law, I also realize that this method requires a lot of preparation and therefore, it's time consuming. I can understand now why people do not recommend us to take more than 4 courses. Heck, I've already spent much of my time just for one course, what about the other 4 courses that I'm also taking? Wish me luck.             
  • Do Companies Have a Duty to Satisfy Their Employees' Best Interest? (Guest Blogging at Cafe Salemba)



    You can read the post here. Enjoy.
  • The Vicious Cycle of Indonesian Legal Education


    I've spent the last three weeks collecting law journal articles for my personal research and I was very surprised when I realized that I had obtained around 900 articles from only 20 or so US law professors. I note that Richard Posner and Cass Sunstein are probably the most productive ones. Posner himself has written more than 290 articles for law journals (that's what I've gotten from Hein-Online) and I know that he also write countless books and opinions as a federal judge. So yes, saying that he is a prolific writer would be an understatement.

    My first reaction to this fact is making a comparison with Indonesian law professors. Honestly, it is very rare to find Indonesian law professors who actively write their thoughts in Indonesian law journals or books. Heck, it is even harder to find law journals which can survive their first publication. To the best of my knowledge, most professors spend their times writing newspapers op-ed or acting as expert witnesses. It's a pity, but I cannot blame them entirely.

    The Problem of Compensation and Lack of Funding

    There are two key issues relating to the poor performance of our professors and journals. First, it's the lack of compensation . It's just too small compared to their US counterparts! A US law professor in a prestigious law school can obtain around US$150,000 dollar per year. By Indonesian standards, this is ridiculously huge. Even the salary of a senior lawyer in a first class Indonesian law firm does not reach that amount. The last time I heard about the salary plan for a professor in University of Indonesia, it's around Rp10 million per months or around US$14,000 per year (not clear though whether this is a gross or net amount). For junior or mid term lecturer, the salary is even lower.

    The fact that the legal status of some state universities is in turmoil does not help solving the above problem. Not only that it is not clear how universities should be able to procure their own internal funds, the employment status of their lecturers are confusing. What are the incentives then for them to focus on doing useful research and producing high quality academic products?

    A major source of this compensation problem is lack of university funding. I must admit, there is a huge discrepancy of school fees between Indonesia and United States and it affects the overall compensation for the professors and lecturers. Imagine this, between 2001 and 2005, my yearly tuition fee for studying at the Faculty of Law, University of Indonesia is around US$250 (assuming that US$1 is equal to Rp9,000). That is 1/192 of my current tuition fee at the University of Chicago. I know that University of Indonesia's tuition fee has increased considerably within the last 6 years, but I am quite certain, it is still far away from our US counterparts.

    Tuition fee is the primary source of university funding, other than sponsors and donors. That's the hard fact. Asking universities to cut down their fees while requiring them to maintain or even improve their quality is absurd. Asking the government to finance the entire education costs is also difficult, especially in a period where we don't know whether having a government is worse than having no government at all. Two basic principles that should be adhered: (i) great education does not necessarily have to be cheap and (ii) people should not be discriminated from getting high quality education based on their poor financial condition. The solution? Cross subsidy between the rich and the poor.

    Another way for getting fresh money for the University is by finding a sponsor. I applause University of Indonesia's decision to bring Starbucks to the campus. If these shops can attract more money from the rich kids and they are being used to foster the University, why not? Unfortunately, instead of having realistic and pragmatic debates such as does the University get a good deal from this transaction and does the University put the money for good use, we have some ridiculous debates on whether this decision brings the University of Indonesia toward consumerism or whether it is appropriate for the University to bring Starbucks, which  is owned by a "villain" (by the way, the said villain's company owns countless major products and brands across Indonesia and I wonder whether people know that they might actually use the products without knowing who own the company, but that's for another discussion on liability of shareholders and their companies), to the campus area.

    As long as this funding issues cannot be solved, I do not expect that the life quality of the professors and lecturers can be significantly improved and the incentives for them to perform better are getting smaller. Why do you think that professors choose to write for op-eds instead of journals? It's a gate for becoming famous, and once you're famous, Indonesian people will mostly hear what you said. Then you can become an expert witness or a speaker in seminars and workshops. The payment is quite good. Why bother doing research that produces almost nothing?

    Another people may argue that being a lecturer means devoting yourself for the betterment of the society. True, but it is hard to find those kind of people, and even if you find them, how many of them will stay the same for a long time if they can't properly feed themselves and their family. In the end, incentives matter. Compensation means a lot, and you can't expect to have a better compensation with lack of funding.


    Lack of Research Culture

    This might sound like a broken record, by the second key issue is very typical, there is a lack of research culture in Indonesia. I don't have a solid empirical data to back up my claim, but at least for the subject of law, I have not found any legal groundbreaking ideas for the past 10 years, either in the form of books or journal articles. The days where professors wrote countless books, such as the legendary Subekti and Wirjono Prodjodikoro, are over. I think the only remaining productive legal writer is J. Satrio and that's it. Most professors only publish unedited anthology of their articles and therefore it's difficult to find a coherent and systematic thinking within the book.

    I can also tell my experience during my law undergraduate study days. Most of the time, the lecturers have already summarized the reading materials to be read by the students and they instruct to student to purchase those summarized reading materials. Yes, learning is easier by this way, but it also discourage our reading and writing culture which is essential for creating a culture of research! I can tell you that living as a law student, at least in my time, was not that hard. In fact, I had plenty of leisure time during my study. If you really want to advance your own thoughts, there are no other ways than investing your own time to read materials and write by yourself. For some people this is good, meaning that they will have additional time to learn new things without having to cope with too many tasks from the school. The ultimate question is, how many people actually choose this way?

    Since the professors and lecturers don't have enough time to maintain their student (i.e. too busy to do other additional jobs), they usually don't give the students plenty of reading materials or ask the students to make papers. Even if they do, papers are usually made in group. Furthermore, since they won't have much time to read too many papers, grades are usually determined by a mid test and a final test. If you have read the summarized reading materials, I can assure you that you should be able to obtain good grades. Thus the vicious circle of our legal education is created. The lecturers have little incentives to conduct academic researches nor to encourage students to do their own research and the students also have little incentives to give extra effort in their study since in the end of the day, they can always survive the test by only reading the summarized reading materials. Life is easier, of course, but it's a dull one.

    To solve this vicious circle, there is no way other than giving the correct incentives and I say the first priority should be given to the academics since they are the life and blood of the university. Without them, there would be no one to educate the students. So compensation should be the start.

    To close this post I want to show the irony in Indonesia with respect to the quality of the University outputs. The admission test in Indonesian Universities is extremely competitive. I bet that getting admitted at the University of Indonesia is harder than getting admitted at Harvard (in terms of the amount of people submitting their application and the percentage of those who are eventually admitted). Yet, with such rigorous application process, we are not yet able to produce the quality of output as good as Harvard. Isn't that a waste of time? Collecting the best of the best of Indonesian young students but fail to nurture their maximum potential. Let us do what we can to contribute for the betterment of our legal education system.
  • The Validity of Slavery under Islamic Law (A Short Review of Bidayatul Mujtahid)


    As previously mentioned in my post, I've been doing a research on the validity of slavery under Islamic Law as a part of establishing a general theory of Islamic Law. While I have collected many new books and law journal articles on this issue, trying to find empirical evidence of how classical Islamic legal scholars took it, I've just realized that I missed one of my important sources that has stayed with me for years, Bidayatul Mujtahid, a superb comparative fiqh book written by Ibn Rusyd, a prolific and famous Islamic legal scholar (though most western people know him as a philosopher rather than a jurist). The book is considered as a masterpiece and is still used in various Shari'a faculties around the world as teaching materials, even though it was written around 800 years ago (or around 600 years after the birth of Islam).

    So a couple of days ago, I read again the Indonesian and English versions of Bidayatul Mujtahid and I found out in the Jinayat (penal offenses) section, Zina (unlawful intercourse) sub section, that having an intercourse with your own slave (whether you're marrying or not marrying the slave) is not considered as a penal offense. In fact, Ibn Rusyd states in such sub section that this has been agreed by all of the Islamic legal scholars (as of his time). The sub section also discusses certain other issues such as the legality of having a sexual intercourse with other person's slave (with the master's consent), or whether a father is free to have a sexual intercourse with his son's slaves or a man to have a sexual intercourse with his wife's slaves. Although Ibn Rusyd recorded that Islamic legal scholars were still in debates on the validity of these actions, several of them have already considered those acts as permissible without the necessity of imposing any penal sanctions.

    Upon reading this, I quickly understand that slavery is indeed not prohibited under classical Islamic Law. The legal logic is simple: you can't validly have a sexual intercourse with your slave if slavery is legally prohibited. This is also supported with the fact that some scholars allow a person to enjoy other person's slaves with prior approval on the basis of asset's transfer! On technical legal issues, I salute these classical scholars for being innovative, but isn't that mean that slavery still existed even 600 years after the birth of Islam and people still think it as an ordinary legal action? 

    Now I wonder, if we know that slavery is  valid and permissible under Islamic Law, and the Koran never says that it is prohibited, nor condemns the act, can we now prohibits slavery? Under what basis? That this is a law that should be changed in accordance with the situations and conditions? Why can't we do the same with other Islamic law subjects? If we prohibit slavery, can we be considered as breaching God's rules by prohibiting things that have been declared as permissible?

    As a separate note, you might be interested to know that modern scholar like Wahbah Az-Zuhaili still allows slavery of women and children in terms of war prisoner to the extent that they can be distributed as war's spoil (ghanimah). You can refer to his discussion in Fiqih Islam Wa Adillatuhu, General Fiqh Section, Jihad - War Prisoner sub section (it's in the 8th book of his book's Indonesian version).

    Interesting issues to be followed up. Let's see whether I can finish my research during my study at University of Chicago.
  • Definition of Witness: A Grammatical Misunderstanding


    On 12 August 2011, the Indonesian Constitutional Court issued its decision concerning judicial review of Law No. 8 of 1981 on Criminal Procedural Law ("Criminal Procedural Law"). You can download the decision here. Under the decision, the Constitutional Court deemed that the definition of a Witness should be amended from "a person who can give testimony for the purpose of investigation, prosecution, and trial on a criminal case which is heard, seen and experienced by him/herself" to become "a person who can give testimony for the purpose of investigation, prosecution, and trial on a criminal case which is not always heard, seen and experienced by him/herself".

    According to the Constitutional Court judges, the definition should be amended since based on grammatical interpretation, the term "is heard, seen and experienced by him/herself" refers specifically to the criminal case itself. As such, such definition will violate the rights of the defendant to bring witnesses that might support him in the trial process such as alibi witnesses that probably do not see, hear or experience the relevant criminal case (because the criminal case does not occur).

    I have to say that this is an issue of simple grammatical misunderstanding and the solution provided by the Constitutional Court creates another problem. Grammatically, there are two ways to read the above clause: (i) the term "is heard, seen and experienced by him/herself" refers specifically to the actual criminal conduct; or (ii) the term "is heard, seen and experienced by him/herself" refers to the testimony/information given by the witness in relation to the case at hand. In cases where we use plain meaning technique to interpret the text of law, we must also rely in the principle that plain meaning approach can only be used when it would not lead to an absurd result. Surely, using the first interpretation will bring significant trouble in practice.

    As a comparison, under the US Federal Code of Evidence, a witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of such matter. This is common sense, a witness can only testify about things that he/she really knows. In line with that, I am certain that the second interpretation would fit better in interpreting the definition of witness under the Indonesian Criminal Procedural Law.

    In my opinion, the solution of the Constitutional Court might create an issue concerning the competency of the witnesses. First, the fact that they don't see, hear or experience the criminal conduct by themselves does not necessarily mean that their testimony is always relevant to the case. This will open a chance for the defendant to bring any witnesses that can support him even when there is no merit of such testimony to the case, such as testimony on the character of the defendant. Trial process involves emotion and judges are not robots, and thus a good framing of the defendant is always helpful. Is this good or not? Further evaluation is needed but surely this will depend on our taste of morality and human rights.

    Second, in worst case scenario, the generality of the wording used by the Constitutional Court may also be used by prosecutors and polices for using witnesses that do not see, hear or experience the criminal case against the defendant. This is surely absurd, but judging from the absurdity of the solution, I am not surprised if polices and prosecutors exploit this loophole. Time will tell.
  • Testimony of Dead People from Twitter: Valid Evidence?


    I find this tragedy as a case with a very interesting legal feature. Basically, a boy who was driving recklessly caused the death of two of his classmates last saturday morning. How do we know about his reckless driving? Prior to their death, one of the victim shared her experience through Twitter, saying that the boy was entering a drag race with his friends as passengers! Then another victim re-tweeted the tweet, confirming the information about the boy's involvement in the drag race (I have to put a caveat here though, re-tweeting a tweet does not necessarily means that the re-tweeted tweet is true). From the news, I understand that there are two other survivors from this accident, which would be helpful as witnesses in the court. However, let us assume in this case that there is no evidence who can confirm the boy's reckless driving that night. Can we then use the written testimony of his dead friends in Twitter as the basis to punish him in the court?

    Legally, this would be a challenge. Under Article 162 of Law No. 8 of 1981 on Criminal Procedural Law ("Criminal Procedural Law"), in case a witness who has provided his/her testimony to the investigator dies before attending the trial, his/her testimony can still be read in the court. If the testimony has been given under an oath, such testimony will be treated equally with a testimony given by a witness who attend the trial. If not, I would say that Article 161 (2) of the Criminal Procedural Law will be applicable, i.e. the testimony will not be considered as a valid evidence although the judge can use it as a supporting information in rendering his decision. In any case, if the minimum rule of two items of evidence cannot be satisfied in the court, such information will be useless.

    In our case, however, the victims were already dead before they can say anything to the investigator. Thus, I doubt that their testimony can be considered at all. I also doubt that tweets can be treated as as a Letter Evidence (alat bukti surat), since it must be supported with or made under an oath. And even if it can, it will only work if it is used in conjunction with the information found from other evidence (which is none in our hypothetical case).

    As much as I am sympathetic with the victims, I must say that I'm in agreement with the law and I would not support using informal written testimony of dead people as a valid evidence even though it might contain a grain of truth. Why? Simply because you cannot cross examine that kind of testimony and therefore it would be impossible to determine its accuracy. After all, everyone can say anything in their writings, including through Twitter, and we can't verify whether they are telling the truth without further examination.

    I can only hope that justice will prevail in this case. Remember, under Indonesian Penal Code, causing death of other people due to negligence is a criminal act punishable by maximum 5 years prison. This is not something that you can get off by simply saying that you're sorry.
  • A Second Anniversary That I Almost Forgot!


    Oh dear, it seems that I almost forgot the second anniversary of this beloved blog! I've been busy with the preparation for my post graduate study at the University of Chicago Law School, e.g. completing all of my remaining corporate lawyer work prior to leave (so that I won't have any additional homework during my study), preparing my travel to and living needs in Chicago (getting US visa and securing an apartment lease), and pulling together the learning materials (the law school database was opened already in June and I must say that I am overwhelmed with the enormous data, very exciting!).

    I hope that I can be more productive in this blog as soon as I have settled my live at Chicago. Stay tune folks.        
  • Legal Analysis Tool Kit Series: Baselines or Where Should We Start?


    Welcome to the second episode of Legal Analysis Tool Kit Series! Our today's discussion will focus on the concept of Baseline or to put it in a simple way: where should we start before we can impose a law or policy? The concept of Baseline is an interesting one because it deals with the fundamental issue of the original position of certain rights or obligations. Let me give you an example:

    In Indonesia, we have regulations on minimum wage for workers. Suppose that someone goes to the Constitutional Court and demand that such law should be annulled on the basis that it contravenes his constitutional rights of freedom to work (Article 28 D (2) of the Constitution). The basis of the claim? A company rejects him from a working position because it isn't able to pay him the minimum wage and therefore the company refuses to accept him. This is a hypothetical case since I haven't  done or read any research on the actual relationship of minimum wages and the companies' willingness to recruit new workers. For the sake of this post, let us assume that: (i) there is a big fine for companies who do not follow the minimum wage law, (ii) we are dealing with small and medium enterprises where salary of their workers is a major factor, (iii) the administrative costs for getting an exemption for the minimum wage is too high and taking a long time, and (iv) they tend to reduce their recruitment activities rather than paying new workers with the stipulated minimum wage.

    Question 1: Can we say that this minimum wage law contravenes the constitutional right of the unfortunate potential worker?

    Question 2: To what extent can the Government actively limits the rights of freedom of contract of its people? Should the Government leave them alone and deal with this issue by themselves, i.e employers are free to pay their workers provided that the parties mutually agree such arrangement?

    Question 3: What would be the position of the Government in this case? If the policy brings problem to certain members of the society but also good things to other members of the society (such as the current worker which will enjoy the minimum wage), should the Government revise such policy? On what basis? Can it say that since more people enjoy the benefit of the policy then the policy should be maintained? Is it fair for the unfortunate ones?

    The basic problem of all of the questions above is the issue of Baseline, i.e what's the original position of the Government with respect to its citizen rights to obtain work? Should the Government interfere in the first place or not? Dealing with Baseline is difficult since here we are trying to determine the original position of something to which our next actions will be greatly influenced.

    Anyway, let us try to answer the above questions:

    1. Minimum Wage and Constitutional Rights

    Some people will argue that in general, employers' position are stronger than the workers. Thus, the Government should intervene and provide protection to the weaker party. This should be the intention of the Constitution, fairness and equality for all. But will that argument work for our case? A man losing his job opportunity because the company does not want to pay its additional worker with the current minimum salary. Doesn't this fact contradict the original intention of the Constitution to protect the weaker party (if such intention exists)?

    However, with this kind of fact, do you think that we have enough basis to say that the constitutional right of the worker has been jeopardized by the existence of such minimum wage policy? Does the fact that he is actually willing to receive lower wages in order to secure a job but the current law does not permit that and therefore he loses his opportunity to get that job can be considered as a violation to his constitutional rights? In this case we need to go to the second question.
       
    2. The Limits of Government's Intervention

    To what extent can the government limits private mutual arrangements between the parties? I would say that we are now dealing with a Baseline, i.e. should Government leave us alone in our private arrangements? Or should Government intervene whenever there is a possibility that a weaker party can face unfair treatment?

    To answer the above question, I will tell you another case: A man is really in need for money to pay the medical bills for his wife and to get the money he is willing to enter into a contract which he would never enter into if he is not in dire need. Currently, he doesn't have many choices. He has asked for loans from his friends and family members and no one can provide him with the amount. At last, he found a loan shark that is able and willing to provide the loan. The loan shark believes that this man capacity to pay is rather weak and he is out of option, so he imposes an extremely high rate of interest. The man agrees with the condition, and so he receives the money to pay the medical bills.  

    If we believe that our basic rule is to always protect the weaker party, should the Government impose a law prohibiting any person to take advantages from this situation or to impose certain conditions that seem unfair in the loan agreement, whereas, as a result of which, the loan must be renegotiated to reduce the interest rate and to give better payment options for the man? Do you agree with this approach?

    Now, let us change the case a little bit. The above troubled man has a very beautiful house. He also tries to sell his house to raise some funds, but since the market is busted, no one is willing to take the offer. Suddenly, a person comes and knowing that the man is in dire needs, he offers to buy the house for just 10% of the original price. The actual economic effect of accepting this offer would be similar with receiving the highly interest loan from the loan shark. Eventually, the man chooses this option and sell his house with such terrible price. Question, should the Government forces them to renegotiate the price of the house to find a better and fair price under the rule that we must protect the weaker party? Would you support the Government's act to force these consenting parties to renegotiate the house transaction?

    Intriguing isn't it? I would like to know whether your opinion would differ for these 2 cases. To be consistent, the answers for these cases should be the same. Why? Because the economic effects are just the same and both deals are made within an unfair condition, i.e. the man doesn't have many options, is willing to enter into bizarre contracts, the necessity for paying the medical bills is high and he doesn't have much time. But I bet that most of you will say yes for the first case and no for the second case. I would happy to hear other opinion in this matter.

    Anyway, the thing that I want to show you here is the fact that it is really difficult to determine the Baseline for    Government intervention. Deciding the case on a case by case basis would most likely costly, and avoiding such cost is one of the reasons for stipulating a general law that could be applicable for any cases. And speaking of that, it's the right time for us to move on to Question 3.

    3. The Government Option

    For the last question, we understand from the above case that some people will receive benefits from the minimum wage policy (current workers) and some won't (potential workers). If we say that the protection for weaker party is necessary for the sake of fairness and equality, how could we justify the fact that this policy may also hurt the parties that we're supposed to protect?

    More interestingly, if in the end the Government chooses to maintain the policy on the basis that more people are being protected, do you think we can still justify this act under the name of equality and fairness? To be honest, this would be another form of implementing cost and benefit analysis in designing public policy, i.e.: if the overall costs are higher than the overall benefits, the Government should not pursue such policy. Some philosophers attack this approach as something that against the concepts of fairness and equality. If we calculate that the costs of protecting minorities are higher than the benefits, why bother making policies that protect them?

    I would stop at this point as my main purpose with this article is to conduct a training of thought. In public policy and law designing, there are no easy answers and determining the Baseline would always be something that we have to analyze carefully. Hope this is useful.


  • The Protection of Criminal Suspects in Law and Economics Perspective

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